Canada's employment situation is deteriorating more rapidly than headline numbers suggest, according to analysis from National Bank of Canada (NBF). While recent payroll growth might appear reassuring at first glance, a closer examination reveals converging weakness across multiple labor market indicators that paint a concerning picture for job seekers and the broader economy.

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Payroll Growth Masks Underlying Stagnation

Canada added 21,000 payroll employees in July 2025, according to Statistics Canada's Survey of Employment, Payrolls and Hours (SEPH) data. However, NBF economist Taylor Schleich cautions against reading too much into this single data point, noting that Canadian employment data tends to be volatile and requires broader context for accurate interpretation.

The more revealing trend emerges when examining the data over a longer timeframe. SEPH figures have barely moved throughout 2025 and are now converging with the Labour Force Survey (LFS) after months of divergence between the two measures. NBF's analysis shows that the six-month average for SEPH was previously weaker than the LFS, but recent softness has brought both measures into alignment, leaving little doubt about the labor market's stall.

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Job Vacancies Plunge to Eight-Year Low

The challenge for unemployed Canadians extends beyond sluggish job creation. Canada's job vacancy rate dropped to 2.6% in July, down from 3.1% a year earlier and a stark decline from the 5.6% rate recorded in 2022. This represents the lowest vacancy rate in nearly a decade outside of the pandemic period.

The contraction in available positions is particularly notable when compared to pre-pandemic norms. Canada's vacancy rate now sits well below its 2018-2019 average, while U.S. job openings have returned to roughly pre-pandemic levels. This divergence suggests Canada is underperforming relative to the broader North American economy, pointing toward a more difficult recovery ahead.

Job vacancies decreased by 79,400 positions on a year-over-year basis, representing a 14.5% decline. Even on a month-to-month basis, July saw vacancies drop by 20,600 positions, or 4.2%, bringing the total number of job openings to fewer than 470,000 across the country.

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Competition for Jobs Reaches Crisis Levels

The combination of weak job creation and plummeting vacancies has created intense competition for available positions. There were 3.3 unemployed Canadians for every job vacancy in July, up from 3.2 in June. This marks the highest unemployment-to-job vacancy ratio since early 2017, excluding the pandemic years of 2020 and 2021.

The comparison to 2017 is particularly instructive. While the unemployment-to-vacancy ratio reached similar levels eight years ago, the economic context was fundamentally different. In 2017, the labor market was improving and monetary policy remained accommodative, with interest rates in stimulative territory. Today, the market is eroding while the Bank of Canada's overnight rate sits at what policymakers consider a neutral level, providing less room for support.

Despite some moderation in population growth, Canada has still added over 157,000 people as of the third quarter of 2025. This continued population expansion, combined with a 12% year-to-date decline in job vacancies, intensifies competition for the shrinking pool of available positions.

Long-term unemployment has also reached troubling levels. Nearly a quarter of unemployed Canadians in July had been searching for work continuously for 27 weeks or more, representing the highest share of long-term unemployment since February 1998, excluding the pandemic years.

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Weakness Extends Beyond Trade-Exposed Industries

The Bank of Canada has characterized labor market weakness as largely isolated to trade-exposed industries, but NBF's analysis challenges this assessment. While goods-producing industries have indeed seen job vacancies decline by 18% year-over-year, services sector openings have also fallen sharply, dropping 14% over the same period.

Professional services, administrative roles, real estate, and even finance have all experienced significant declines in job vacancies. According to Schleich, a 14% year-over-year drop in services sector openings contradicts any characterization of the sector as resilient. The breadth of weakness across industries suggests the labor market's challenges extend well beyond tariff concerns or trade policy uncertainty.

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Implications for Homebuyers and Real Estate

The deteriorating employment landscape carries significant implications for the housing market and prospective homebuyers. Stable employment is a fundamental prerequisite for mortgage qualification and homeownership sustainability. As competition for jobs intensifies and unemployment duration lengthens, more Canadians may find themselves unable to meet lender requirements or forced to delay homebuying plans.

For current homeowners, the weakening job market increases financial vulnerability, particularly for those with variable-rate mortgages or upcoming renewals. The combination of elevated interest rates and employment uncertainty creates a challenging environment for household budgets.

NBF's analysis suggests the urgency for monetary policy relief is greater than markets currently anticipate. The bank recommends accelerating interest rate cuts to October rather than waiting until January, as market expectations suggest. Earlier rate reductions could provide much-needed credit cushioning for households navigating an increasingly difficult labor market.

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Understanding the Broader Economic Picture

The convergence of multiple negative employment indicators suggests Canada's job market faces headwinds that extend beyond temporary disruptions. The alignment of SEPH and LFS data, combined with falling vacancies across all major sectors and rising unemployment duration, points to structural challenges rather than transitory weakness.

For Canadians considering real estate decisions, understanding these labor market dynamics is essential. Employment stability and income security form the foundation of successful homeownership. As the job market continues to weaken, potential buyers should carefully assess their employment situation and financial resilience before making long-term housing commitments.

The data underscores the importance of working with knowledgeable real estate professionals who understand how economic conditions impact housing markets and can provide guidance tailored to individual circumstances in an uncertain environment.